Thursday, 26 February 2015

Not Patently Obvious

It is surprising how little-understood patents are. Ever since 1989 I have managed to find myself responsible, at one time or another, for the patent portfolios of each of the companies I have worked for. I am also an inventor on several issued patents. So I know a little bit about the subject - at least enough to know that most people hold onto a number of misconceptions. I thought it would be instructive to post an overview of the key issues pertaining to patents.

First of all, it is important to understand what can be patented and what can’t. A patent must describe either a specific thing, or a specific method of making a thing. By specific, I mean that the inventor must clearly describe exactly what constitutes that thing, and provide clear criteria that permit the reader to distinguish the invention from something which is not covered by the patent, leaving as little as possible in the way of a "grey area". Generally, there must be an ‘inventive step’ - a critical point at which the invention departs from what was previously known (what we call ‘prior art’). Also, a patent must contain ‘full disclosure’. In other words, it must contain everything that ‘a person skilled in the art’ would need to know to be able to successfully replicate the invention. The inventor must not withhold some key “secret sauce” from the patent disclosure. Weaknesses in these areas can result in a patent having its applicability restricted, or even being invalidated, at some point in the future.

Patents can only cover something which has been invented rather than created, so, for example, you can patent a clever new way of making words appear on paper, but you cannot patent the words themselves - those you might consider copyrighting. You cannot patent your logo or business name - those you might consider trademarking. You cannot patent your customer list - that would be a trade secret. And you cannot patent all the brilliant things that could be done "if only someone would invent such-and-such a thing". Those you could write a science-fiction novella about.

Finally, the patent should disclose who invented the invention. There can be multiple inventors, but if so, each listed inventor must be able to point to a critical aspect of the ‘inventive step’ for which they are responsible, and all of the actual inventors must be included in the patent. Just being the owner of the company for whom the inventor worked does not entitle you to be listed as an inventor [It is said that Elena Ceaușescu, wife of the communist dictator of Romania, had her name included as an inventor on all Chemistry patents issued in Romania]. It is not unusual for all rights in the patent to be assigned to a third party, usually the employer of the inventor(s), although the inventors’ explicit consent is required for this to happen.

The structure of a patent comprises two parts, the Specification and the Claims. The Claims are the most important section of the patent. Only what is claimed in the Claims is protected by patent law, and this is a very important distinction. The claims describe, in a manner set forth both by statute and by common practice, exactly what has been invented. Someone reading them might well be unclear on exactly what those dry and clipped claims actually describe. Taken on their own, there may be some ambiguity about what the specific language in the claims refers to. Therefore, patents also include a Specification section in which the invention is described in detail, in the context of the pre-existing state-of-the-art, and some examples of specific embodiments of the invention are provided. That way the Claims are designed to be read and interpreted in the light of the Specifications.

It is important that the claims of a patent describe only the new inventions for which the inventor is seeking protection. If a claim describes something which pre-existed before the patent application was submitted, a circumstance known as ‘prior art’, then that claim - and in some circumstances the entire patent - can be held to be invalid. This will be the case regardless of whether or not the inventor was aware of it. Often there may be some ambiguity regarding whether a key aspect of a claim is or is not anticipated by a certain item of prior art, and this may be known and understood by the inventor. In that case, the Specification will typically include material identifying such prior art and explaining why and how the inventor’s claims are distinct and different.

Once you have written your patent, it must be submitted to the patent office for approval. The patent office will assign it to a patent examiner who will make a cursory, but intelligent, examination of your patent and will attempt to establish whether or not the submitted document meets all of the requirements to be granted as a patent. He may question whether the disclosure is complete. Or he may raise specific objections based on existing patents or other publications which he considers may describe prior art. You will then have the opportunity to address those objections and either re-submit the patent or provide clarifying information to the examiner. This can go back and forth many times, or not at all. The details of all such back-and-forth dialog will stay in the patent’s history file, and may be referred to in future if the patent is ever challenged in court. In any case, the end result of the process is that in due course the patent is usually issued. A patent only comes into force after it has been issued.

Once issued, the patent has a severely restricted lifetime. In the US this is 20 years from the date when the patent was first filed with the patent office, regardless of how long it may have spent going back and forth with the examiner’s office prior to issuance. Once the patent expires, it no longer conveys any protection whatsoever. There are no ways to get around that.

It is one of the big mistakes that people make in regard to patents that they over-estimate the value of an issued patent. All issuance demonstrates is that the examiner has been persuaded that the inventor has met the requirements for a valid patent. It does NOT guarantee that the patent actually does meet those requirements! Which can come as a big surprise to someone who has shelled out a lot of money to get to that point.

So what use is a patent then? In reality, if you are the owner of a valid, issued patent, it gives you a legal basis on which to approach a third party who may be infringing that patent against your wishes and ask them to either stop doing so or purchase a license. Generally, what happens next depends on whether the third party is bigger than you, and has greater financial clout. If the party continues to ignore your entreaties, you will have the right to sue them for patent infringement. Always bear in mind that knowing someone is infringing your patent rights is one thing - but it may be rather more difficult to prove it in a court of law.

A court of law is the only place where the ultimate blessing of validity can be bestowed upon a patent. This is where you end up if you sue somebody - or if somebody sues you - for patent infringement. A court of law can do what the patent examiner does not. It can examine the patent in minute detail and pronounce with finality on whether the patent is or is not valid. It can choose to limit the patent’s validity or invalidate it entirely. In rare cases it can order the patent to be re-submitted with additional material in order to expand its validity. A patent whose claims have been upheld in court can no longer be challenged. The owner of a patent whose claims have been upheld (or even declared invalid, for that matter) in a court of law will also be up to $10M lighter in the wallet. Yes, Doris, that was an ‘M’. A patent infringement lawsuit is not for the faint of heart.

In the US, the doctrine of triple damages applies. This means that if you infringe on the patent rights of a third party, in full awareness of those rights, then you will be liable for not only the damages you are held to have caused, but triple the damages. The fear of incurring triple damages ensures that even large and powerful entities will take a patent infringement lawsuit seriously, because triple damages presents even a penurious client with an opportunity to seek serious legal representation on a contingency basis.

We’re still not done yet. You have yet to decide where, geographically, you want your patent to have force. If you have a US patent for example, your competitors in Germany, Japan, China, etc., can freely and legally enjoy full use of your patented inventions. Your only remedy may be to stop that entity from importing infringing products into the US. If you want the protection of your patent to extend to other countries of the world, then you have to file for patent protection in those countries too. But be aware that your patent rights, the degree of protection offered, and the remedies available against infringement, may be different in each country. Filing internationally gets to be very expensive, since your patent will usually require to be translated into each country’s native language, and rendered fully in compliance with each country’s patent codes. Also, you cannot sit on your hands and see how things work out before deciding whether to file internationally. You have to make that decision up front (in practice, there is a mechanism that can give you up to 12 months of breathing room for some countries, but that’s all, and its not much).

Finally, what does all this cost? First of all, you will benefit from the services of a good patent attorney. Yes, they charge up to $400 an hour, but there are good reasons for that. I wouldn’t dream of filing a patent without the assistance of top quality counsel, and indeed I never have. There are so many ifs and buts when it comes to costs, but I will give you two pegs in the ground that I think are fair. To get to the point where you have a high-quality issued US patent will cost you $10k to $20k. If your ambitions are international, a fully issued patent portfolio in a basket of countries in which a technology-oriented company might wish to do business will set you back $150k to $250k per patent. That’s not chump change. Remember, this is to arm yourself with a single issued patent, which may be willfully ignored by someone who doesn’t think you have the balls to sue them, or which may be shown to be invalid - whether in court, or in one of those “oh dear” moments when you open a letter containing a sheaf of technical documents that you wish had come to your attention before committing to all the expense of filing the patent in the first place!

At this point, a quick detour into good business practice. Because of the doctrine of triple damages, companies and individuals should always make it strict policy that nobody (but NOBODY, other than in-house counsel) should ever read the Claims of any patent of which they are not the author. If such a policy is carefully implemented in practice, then it follows that, legally, neither the person nor the entity can possibly be aware of any infringement of any patent. Since only the Claims describe what is patented, even if you have read the Specifications section of a patent which you are accused of infringing, if you haven’t read the Claims you cannot know what has actually been patented. This may sound devious - lets be honest here, it IS devious - but if you retain a blue-chip patent attorney this is the first lesson that he will hammer into you. Practically it is not that hard to do, since claims make for very dry reading anyway.

Patents exist purely as a ‘barrier to entry’. They are a barrier that obstructs your competitors from entering your line of business. In that sense they are no different than the padlock you put on the factory’s front door when you go home for the weekend, or the insurance policies that you pay for once a year. Like the padlock and the insurance, you need to understand what you are protecting yourself against, what the costs are of indulging yourself in that degree of protection, and what risks you run in not doing so. There are exceptions to every rule, but for most small businesses - and I think all audio businesses are small businesses - patents are very rarely a justifiable form of protection. But when telecom giant Nortel’s assets were sold off in 2011 following their bankruptcy, their patent portfolio was sold for $4.5B, in cash. Yes, Doris, that’s a ‘B’.